lot of the US data of recent weeks has been pointing to a softer economy but the slim 0.2% growth rate in this morning’s Q1 report was down substantially from the 2.2% growth seen in Q4 and substantially below the 1.0% the street had expected for Q1. Meanwhile, inflation pressures also eased with Core PCE (an inflation measure the Fed uses) dropping to 0.9% from 1.1% previously.
A slow economy and soft inflation has driven another nail into the coffin of a June interest rate liftoff, sending USD lower again. Traders now look to this afternoon’s FOMC decision for signs of how long the first rate hike may be delayed.
Whether we get liftoff in the summer or not now depends on what April data looks like. Last year, the US economy was disrupted in the winter then roared back to life in the spring. So far, there have been questions over how much of the winter weakness was related to weather, or the oil price crash, or the higher USD, or other factors.
If we get a quick rebound once again, the Fed could still look to a September liftoff, but if we don’t and Q1 ends up being the start of another soft patch, liftoff could be delayed to the end of the year. The initial flash PMI reports for the US haven’t been impressive but they weren’t terrible either. Because of this, today’s FOMC statement, Friday’s manufacturing PMI and next week’s US payrolls may attract even more scrutiny and attention than usual.
US stocks have also been trading lower this morning as the soft GDP report raises questions about the trend for corporate sales and earnings growth which has already been impacted by the higher USD. Twitter’s fiasco which saw the numbers leak just before the close and the stock plunge on a sales miss may also impact sentiment, and means the shares could be active on the open again today.
The FOMC is one of four central bank decisions today which may impact trading in currency markets. SEK has been rallying this morning after the Riksbank decided not to cut rates even though the street had expected one. The Riksbank did increase its QE program but the street has decided to focus more on the interest rate side. NOK has been climbing in tandem.
On the other hand, NZD continues to weaken ahead of this afternoon’s RBNZ decision suggesting that some traders are speculating the band could deliver a surprise interest rate cut to keep the Kiwi Dollar down.
Twitter big fiasco, numbers leaked before close, shares plunged 18% yesterday on sales miss $435M vs street $456M, 2015 sales guidance cut to $2.17-$2.27B from $2.30-$2.35B
MasterCard $0.91 vs street $0.80
Time Warner $1.19 vs street $1.09
Garmin $0.55 vs street $0.57
Cenovus Enrgy operating EPS ($0.11) FFO $0.64 vs street $0.51
CGI Group $0.78 vs street $0.79
Economic reports released overnight and this morning include:
Sweden interest rate surprise unchanged at (0.25) a 0.10% cut to (0.35%) had been expected
Sweden bond buying surprise SEK 40-50B increase to program
Thailand interest rate surprise 0.25% cut to 1.50%
US Q1 GDP 0.2% vs street 1.0% vs previous 2.2%
US Q1 personal consumption 1.9% vs street 1.7%
US core PCE inflation 0.9% vs street 1.0% and previous 1.1%
Canada industrial prices 0.3% vs street (0.1%)
Canada raw material prices (0.9%) vs street (2.0%)
UK Nationwide house prices 5.2% vs street 4.1%
Spain retail sales 3.7% vs street 3.6%
Norway retail sales 0.3% as expected
Germany consumer prices 0.4% as expected
NZ trade balance $631M vs street $300M
NZ ANZ activity outlook 41.3 vs previous 42.2
NZ ANZ business confidence 31.2 vs previous 35.8
Economic reports due later today include:
10:00 am EDT US pending home sales street 5.1%
10:30 am EDT US DOE crude oil inventories street 2.9 mmbbls
2:00 pm EDT US FOMC decision 0.25% no change expected
5:00 pm EDT NZ RBNZ interest rate 3.50% no change expected
9:00 am NZST Thu
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